A warehouse operator who "misrotated" beverages—that is, shipping the newer cases before the older ones, so that some cases were shipped out of code—could recover its losses from its insurer as a "physical loss," according to the New Jersey Superior Court.

The operator, Customized Distribution Services, settled with the manufacturer, Campbell Soup, for its losses, which amounted to $1.3 million. CDS’s insurer, Zurich, denied coverage, claiming, among other things, that the policy excluded "gradual deterioration" of products, and that "loss" was defined as "accidental loss or damage." CDS’s own failure to comply with its contract with Campbell’s was not, argued Zurich, such a loss. The trial court gave summary judgment to Zurich.

Wrong, wrote the court, in an opinion by Judge Alley. The terms were ambiguous, and where the terms are ambiguous they must, of course, be construed against the insurer. Customized Distribution Services v. Zurich Insurance Co., 2004 N.J. Super. LEXIS 442 (App. Div. Dec. 16, 2004).